I gmfinancial. 180 Queen Street West, 16th Floor, Toronto, Ontario M5V 3K1. July 20, Delivered by

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1 I gmfinancial 180 Queen Street West, 16th Floor, Toronto, Ontario M5V 3K1 July 20, 2018 Delivered by Ken Woodard Director, Membership Services & Communications Mutual Fund Dealers Association of Canada 121 King St. West, Suite 1000 Toronto, ON M5H 3T9 Re: Bulletin #0748-P Discussion Paper on Expanding Cost Reporting We are pleased to provide comments on behalf of IGM Financial Inc. ("IGM") in response to the request for comments and feedback by the Mutual Fund Dealers Association ("MFDA") of Canada on the Discussion Paper on Expanding Cost Reporting. Our Company IGM is a diversified financial services company and is one of Canada's largest asset managers and has approximately $157 billion in assets under management on behalf of over 2 million clients across Canada. Its activities are carried out principally through its subsidiaries, namely Investors Group Inc., Mackenzie Financial Corporation and Investment Planning Counsel Inc. and their respective subsidiaries. IGM's subsidiaries include a number of securities registrant firms that are registered in various categories with all members of the Canadian Securities Administrators ("CSA") including portfolio managers, mutual fund dealers and investment dealers, and include members of the MFDA and Investment Industry Regulatory Organization of Canada. We have developed at IGM a list of seven commitments that reaffirm our core values, from putting our clients first and ensuring their best interests are at the heart of everything we do, to keeping stakeholders informed by providing information that is relevant, timely, and that can be easily understood.' 1 Our stated commitments are: (i) inspiring financial confidence, (ii) putting our clients first, (iii) helping our clients reach their financial goals, (iv) keeping stakeholders informed, (y) fostering a culture of excellence, (vi) being a good neighbour, and (vii) making sound decisions for the long term. See: r-commitment

2 IGM is a member of the Power Financial Corporation group of companies. General Comments We are supportive of providing clients with a single view of their total costs of investing and therefore welcome the MFDA's efforts to promote the discussion of expanding cost reporting to include ongoing costs of investment fund ownership. We are also pleased that the MFDA will be sharing the results of this consultation with other regulators, as we believe that any expansion of cost reporting must be applicable to all securities registrants, not just MFDA members. In our view, should regulators decide to proceed with expanded cost reporting, regulators should concurrently ensure that any duplicative cost disclosure is eliminated, and that the expanded cost reporting is presented to clients in plain language in a format they can easily understand and use to inform their decision making. We believe this holistic approach to expanded cost reporting is critical. To this end, we continue to believe that the CSA research underway to measure investor knowledge and behaviour about their investments following the implementation of the Client Relationship Model Reforms ("CRM2") and pre-sale delivery of the fund facts document will be extremely informative in guiding the development of not only expanded cost reporting disclosure, but also making all disclosure more meaningful for clients. Finally, we have long advocated for the need to ensure that similar, competing investment products to investment funds, such as guaranteed investment certificates ("GICs") and other deposit products, as well as segregated funds, are treated consistently when it comes to cost reporting, to assist client decision making. We therefore encourage regulators to continue to work collaboratively with banking and insurance regulators to ensure disclosure requirements for investment funds and competing investment products are consistent, both for current CRM2 and for expanded cost reporting. Our responses to the specific questions asked in the consultation follow below. Questions 1. Should regulators consider expanding cost reporting for investment funds? We are supportive of the consideration of expanding cost reporting to include ongoing costs of investment fund ownership, particularly a fund's management and operating expenses. We feel strongly, however, that this disclosure initiative should not be conducted in isolation, but rather as part of a more holistic review and approach by regulators to look at all existing disclosure from a client-centric perspective. If regulators decide to proceed with expanded cost reporting, we believe it will be important to allow flexibility in how the CRM2 information and expanded cost reporting is presented, so that the needs of each registrant's client base and different operating models can be met. 2

3 2. Should regulators consider expanding cost reporting for other investment products? Yes, we believe similar, competing investment products to investment funds should also be subject to current CRM2 disclosure and any expanded cost reporting. Competing products can often appear on the same account statements, so, any clients who hold investment funds and one or more of these other investment products could see compensation cost disclosure only for investment funds and not on the other investment products. In the absence of clear disclosure of the costs built into these other investment products, such as the spread on GICs and other deposit products, clients can be left with the impression that investment funds are more costly than these less transparent investment options, and that these other investment products have no such similar costs which does not provide a true and meaningful basis for comparison. We do not believe this type of approach is in the best interests of clients. 3. Do you agree that the costs considered in this paper should be disclosed to clients? It is important to point out that the costs considered in this paper are in fact already disclosed to clients today. It's simply that clients do not have a single view of their total direct and indirect costs of investing. While we support expanded cost reporting to facilitate this single view, we reassert our submission that should regulators proceed, we believe they should concurrently consider client-facing disclosures more broadly, to ensure that duplicative information is eliminated. This not only will improve the client experience by reducing confusion arising from the various isolated cost disclosures we have today, but also reduce the regulatory burden of registrants. We support the inclusion of the management expense ratio ("MER") and the trading expense ratio ("TER") in expanded cost reporting to clients, subject to the following considerations. Today, published MER and TER disclosure in Fund Facts and the Management Report on Fund Performance provides clients with meaningful, transparent and comparable information of the costs associated with owning an investment fund. It is our view that this same information (using today's methodology) if disclosed to clients as part of expanded cost reporting, will give clients a reasonable approximation and understanding of the indirect costs associated with their investments that is easy to understand, consistent and comparable. We therefore suggest using the most recently published or available rate of MER and TER to provide an approximate estimate of the indirect costs of what the client will pay, having regard to the client's current asset balance at a point in time, rather than the client's share of current expenses based on a "real time" calculation. The methodology and presentation of the MER and TER calculated in this way would also have the added benefit of making it simpler for fund manufacturers to comply, and create consistency across client-facing disclosures in the presentation of this information. While integrated MFDA members with fund affiliates, such as Investors Group, could be well positioned to report MER and TER specific to the individual client's share of current expenses at a moment in time for their own investment funds (and we would like to retain 3

4 the flexibility to do so for our clients), we note that for many fund manufacturers this will be a very difficult calculation, particularly for those that do not have a fixed administrative fee, since MER is not known on a daily basis. In addition, TER can be highly variable and is usually only calculated on a semi-annual basis, in arrears. The introduction of this new methodology and presentation may also create some confusion for clients, as their investments and redemptions fluctuate year to year. We therefore encourage regulators to consider the alternative approach we're suggesting to the inclusion of the MER and TER in expanded cost reporting. In our view, this alternative approach provides a comparable regulatory outcome of providing clients with an understanding of the ongoing costs of ownership using a transparent, consistent and easy to understand calculation that is currently in use. 4. Are there any other costs that should be reported to clients? With respect to disclosure of the MER, we would recommend that tax be disclosed separately, where available. We believe it is important for clients to understand which parties they are indirectly paying, in addition to how much they're paying. 5. What are your views on the reporting examples provided in the paper? With respect to disclosure of the MER and TER, it will be important for the reporting to very clearly disclose the time period covered. We believe Figure 1 would work well to disclose the presentation of MER and TER, as published today. We also like the notion of the MER broken down into components, as displayed in Figure 2. As noted, we would recommend that tax also be displayed in this configuration, where possible. A concern we have with Figure 3 is that the format may cause confusion with clients, who may interpret the trailing commission payment illustrated in this example, to be in addition to the displayed ongoing cost of ownership (rather than being a component of this overall amount). What will be important in the reporting of MER and TER will be providing simple, plain language disclosure of the methodology and the time period that is being used in the calculation, to enable clients to understand how this disclosure is being derived, and for comparability. For example, if our suggested approach to presenting MER and TER outlined in Question 3 above is permitted, we would recommend an articulation something to the effect of, "...this is a simplified example of your indirect costs of owning the mutual funds, using the mutual funds' expense ratios (MER and TER) for the year ended March 31, 2018 and your actual assets for the year or quarter." 6. Are there better ways to report the costs of investing to clients? We believe it will be important to allow for flexibility in how cost reporting is presented, so that the needs of each registrant's client base and registrant's operating model can be met. If regulators proceed with expanded cost reporting, we believe the CRM2 disclosure 4

5 reports should be reconsidered holistically from a client-centric perspective, to allow registrants to create an all-inclusive report to clients of both their performance and their total costs of investing. Our view is that such a report could include educational content, as well as specific information of the services the registrant provides to the client for the fees paid. It's this holistic view that will meet the stated regulatory intention of giving clients a complete and accurate understanding of the costs associated with their investments, to make informed decisions. Among the statement designs we would want to be considered to create a better client experience with expanded cost reporting, we would include the use of graphics and images to convey performance, the use of white space to separate the various elements, and the use of plain language. We believe it will be critical to test various designs with clients, and we would also want to consider digital (web or mobile) ways to share information, and provide explanation and context around the data. To this end, it is our view that providing flexibility to dealers to convey client performance and expanded cost reporting using digital mediums is critical, as web and mobile apps can allow for more dynamic and animated ways to display information, including the use of graphics, data visualization, iconography and animated motion graphics. Provided the requisite disclosure requirements are met, we believe regulators should allow dealers the flexibility to leverage web based digital tools to present this information, as well as provide background and/or further explanations on the costs of investing and the value of financial advice. 7. What challenges or issues do you foresee in obtaining and reporting expanded cost information to clients? Investment fund managers currently track fees and expenses of an investment fund at the fund and series level only. As noted, fund manufacturers that are not integrated MFDA members with fund affiliates, or do not have a fixed administrative fee, will have a particularly difficult time if tasked with providing a "real time" MER and TER calculation based on the indirect costs to the client in owning an investment fund (rather than using the most recently published or available rate of MER and TER, and providing an estimate of what the client would pay based on the client's current assets at a point in time). The introduction of a new MER and TER calculation will also require significant system builds for both fund manufacturers and dealers, as well as for industry service providers, which will impact the speed at which expanded cost reporting can be implemented. 8. Are there different challenges or issues to expanding cost reporting for investment dealers or other securities registrants? As noted, integrated MFDA members with fund affiliates, including Investors Group, will have an easier time to report the individual client's share of current MER and TER expenses of its own investment funds for a specific time period. We strongly support integrated MFDA members who have this capability to retain the flexibility to do so. Even so, we acknowledge that system builds will be necessary. 5

6 9. Based on the cost reporting approaches detailed in the paper, what would be a realistic timeframe for implementing expanded cost reports to clients? The timeframe to be able to provide expanded cost reporting to clients will depend on the method of calculation and presentation of the MER and TER. If regulators adopt our suggested alternative approach, to use the most recently published or available rates for MER and TER and the client's current asset balance at a point of time to present an estimate of what the client would pay, we believe this can be achieved relatively easily by fund manufacturers. If, however, regulators wish to pursue a new calculation of MER and TER to present the client's indirect share of current expenses, then this is a significantly greater and more complex system build for both fund manufacturers and dealers, in order to capture the necessary data on a daily basis at the client level. We believe this latter approach, which would also require engagement with industry service providers, would take up to 4 years to complete. Summar We reiterate our support for providing clients with a single view of their total costs of investing, in a way that enables clients to have a complete and accurate understanding of the costs associated with all their investments (not just investment funds), as well as the services provided for the fees they pay, to inform their decision making. Our suggestion of an alternative way to consider the inclusion of the MER and TER is to facilitate this initiative in a cost effective and timely way, that provides a comparable regulatory outcome for clients. Ultimately, we believe that expanding cost reporting is in the best interests of our clients. We appreciate the opportunity to provide you with our comments. We would welcome the opportunity to engage with you further on this topic. Please feel free to contact me if you wish to discuss our feedback further or require additional information. Yours truly, IGM Fl L INC. Q&(Q( Rh a Goldberg Senior Vice-President, Client & Regulatory Affairs 6